Google’s claim to have introduced a “new approach to buying a mobile phone” isn’t really all that new.

The unlocked version isn’t totally unlocked.

The unsubsidized phone pricing looked like a rip off compared to the subsidized purchase option.

The subsidized phone comes with humongous cancellation fees.

It turns out, there may actually be only two problems (1 & 2) – that you may not even consider to be a big deal.

But let’s look at pricing since that’s why you’re here.

My bad!
Looks like I made a miscalculation yesterday that, when corrected, means that you can actually think of the Nexus One as a $49 phone.

Kudos to the commenter “KPOM” for pointing this out!

The miscalculation involved the comparison of pricing plans between the subsidized and unsubsidized purchasing options. I figured we’ll compare the most fully featured plan you can get – the unlimited triple play of unlimited voice/text/data.

I went to the T-Mobile site and started by pricing out the “Even More Unlimited Talk”. That’s $59.99/mo. Then I added the unlimited data plan for Android phones. That adds $30/mo, brining the total price to $89.99/mo.

I then looked at the “Even More Plus Unlimited Talk + Text + Web” package which is simply a flat $79.99/mo. $89.99 – $79.99 yields a $10/month discount for buying an unsubsidized phone.

At $10/mo, that comes out to a saving of $240 over the course of two years – sounds really nice. But with the subsidized option, the phone is only $179, which is a $350 discount over the $529 full price of the phone. Under that math, the $240 savings is $110 shy of the up front savings for the subsidized plan.

Fortunately, it turns out that T-Mobile’s Even More Plus discount is not $10/mo. It’s actually $20/mo. When I priced the Even More Unlimited Talk plan, I forgot that everything there is a-la-cart. With Even More Plus, one click gets you voice/text/data. Under the Even More plan, you have to separately add both the $30/mo data plan and the $10/month unlimited texting plan.

Adding, Multiplying, and Subtracting it All out
So, the real cost of an unlimited everything plan is $99.99/mo for subsidized phone buyers. Compare that to the $79.99/mo plan for unsubsidized buyers and that’s a $20/mo savings. Over two years, that’s a whopping $480 savings.

Now, that $480 savings is $130 more than the $350 savings you get by selecting the $179 subsidized purchase option.

So, when you think about it, the $20/mo discount to unsubsidized phone buyers is effectively a rebate against the up front cost of the phone.

So, $529 – $480 yields a final purchase price of just $49!

The same math applies to family plans too. A subsidized unlimited everything family plan for two is $179.99/mo, but only $139.99/mo when you buy a couple of unsubsidized phones. That’s $960 off for two line family plans over two years!

So what does this mean?
Simple: Don’t get drawn in by the $179 price tag on subsidized phone! Under the subsidized plan, you’re burning away $130. You can buy a lot of gum for $130!

So Google is our friend after all?
Should we be thanking Google for this new found savings and phone freedom? Not quite.

First, it’s T-Mobile that’s offering the $20/mo discount. It’s not something that T-Mobile is offering because of Google’s arm twisting. In fact, the Even More Plus plans were introduced over two months before Google released the Nexus One.

As a result, you can get the same deal on any phone that works on T-Mobile. Amazon has a selection of unlocked cell phones. Or heck, you can just get an unsubsidized phone from T-Mobile (doubt they’re unlocked though). And if you buy a phone that costs less than $480, it’s like T-Mobile is paying you (OK, not quite).

But it’s still $529 up front
A $480 it sounds like a great deal, but what if you can’t afford $529 up front (More with the first month’s service fees)? You should still try and avoid the subsidized option like it were the plague. Remember, over the course of two years there’s a $130 savings here. Why not put it on a credit card? If you paid the $179 to your credit card company in the next billing statement and stretch the remainder out over two years, you’d have to have an interest rate over 32% for this not to be a good deal.

So, what are the remaining problems?
I’m going to immediately cross off problems 3 & 4. As for #3, the unsubsidized purchase option is not only a better deal than the subsidized option – it’s now irresistible.

As for #4, who cares about the cancellation fees? You shouldn’t buy it subsidized. Google might even be doing you a favor by steering you towards the unsubsidized option (if only they were clearer about the termination fees on the Google phone store).

So that leaves us with problems 1 & 2 remaining. #1 is purely semantic – an issue of truth in advertising – but one that won’t hurt your experience with the product or your wallet.

But we are still stuck with problem #2. Just today, a new article posted today at these are the DROIDS makes issue #2 even more interesting.

It turns out that the Nexus One actually does have the transceiver to be a true “World 3GSM phone”. The Nexus One uses the Qualcomm RTR6285 RF transceiver chip which includes support for AT&T’s 3G frequency bands. But they are effectively disabled due to the lack of compatible power amplifier chips – which are nothing new, and are available on the market from chip makers like Skyworks.

Conspiracy Talk
So, Google/HTC could have very easily made this one phone model compatible with not only T-Mobile and AT&T, but pretty much any 3GSM network worldwide if they only included the right combination of power amplifiers. According to iSuppli’s teardown of the Nexus One, the four small power amplifiers that are in the Nexus One only account for $2.20 in manufacturing costs. $2.20! How much more could a different combination of power amplifiers have cost? Maybe another $2 (at most)?!

It just sounds like a deliberate decision to aid the wireless carrier oligopoly. Given that we’ve seen HTC’s FCC documents to introduce an AT&T oriented version of the Nexus One, you’d think that overall engineering, manufacturing, warehousing, and sales expenses would be lowered enough by offering a single model that could replace two.

The deliberate lack of network compatibility is simply bewildering.

Super Bowl Sunday Update:

The game is starting soon so I’ll make this quick and un-spellchecked …

Regarding cost, I’m glad many of you mentioned that there are ways to get even cheaper monthly service plans. I simply chose the subsidized and unsubsidized unlimited everything plans as an example since they were top of the line plans. Unlimited is simply worry-free.

There are those that still think $59.99 is too much to pay – and I would agree with you. There’s still more downside to go. Voice and text can easily be delivered over data. Now that even the mighty AT&T has given its blessing to VoIP apps, expect to see more use of VoIP – hopefully a fully two-way Google Voice, Vonage, SkypeIn/SkypeOut.

The catch then is to get a data only plan. AT&T seems to only offer data only for iPhone users if they can prove that they are hearing impaired. T-Mobile does list a data only plan called the T-Mobile Total Internet plan for $39.99 monthly. I’m not sure if Android phone users can get this plan. The text on the page (http://bit.ly/9vGc4K) mentions Windows Mobile.

If anyone knows if Android users can get the data only plan for $40, please post a comment. I sent a query to T-Mobile’s media relations. But since it’s Super Bowl Sunday, I don’t expect a response today.

4,260 Comments [Comments are now closed for this post]
Posted by George Thiruva -
February 4, 2010 at 17:59

On the other hand, T-Mobile makes money by selling handsets too. I frequently hear people saying that they want to upgrade their phones but don’t want to deal with the hassle of early upgrade costs and the like. So they don’t buy anything – they just wait out the two years.

I’m certain that with this knowledge some of those people would be spending more money on phones – upgrading more frequently than every two years.

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Too rich. Only in the cellular phone market, where carriers confuse consumers with a myriad of contract options, none of which are in favor of the consumer, could a person spend (over 24 months) nearly $2500 on a phone, and yet still believe that they only paid $50 for it.

I’ll readily grant that the unlocked, unsubsidized contract saves money over the subsidized contract. But let’s not get carried away here! $2500 is still a lot of money.

You also forget that with an unlocked phone you don’t need to get a data plan. For people like me who have wifi at home and wifi at work, it makes no sense to get a data plan. I also use the T-mobile pre-paid option and make most of my phone calls using SIPDroid on Nexus one over wifi. My monthly charges are on the order of $15 a month.

Tempting but $80 + fees a month for phone service is just more than I’m willing to pay. I just don’t like talking to people that much. I have Skype on my iTouch which costs just ~$5/mo and does what I need and a Net10 prepaid phone for $15/mo for those rare times I’m not within Wifi range. I may pay $15/mo more for net access for an iPad when it comes. Altogether still only $35/mo.

Give me unlimited calls and data for under $50 and I’ll be seriously interested. Prices do seem to be dropping all around so I think it’s getting to be a really interesting time for smart phones/devices.

It’s not the cost of the phone that’s the problem but the recurring costs of the service. $80 a month is too much to pay for what you receive. Lower to $40 a month for the same level of service and then it’ll reasonable. $80 a month is far too expensive.

$80 is a great price compared to the rape-like price that AT&T charges for unlimited blackberry usage. Better yet, they charge the same for unlimited data on Edge BB phones as 3G BB phones. They will get an ETF from me this week and that will be that

To add another fine point to your analysis, you should discount the $20/month (just as you include the credit card interest, you can take the money you don’t spend on the unsubsidized phone and put it in the bank). At a 5% annual rate, the present value of $20/month for 24 months is $455.88 making the phone cost $73.12. Your interest rate may vary

I just purchased a nexus one and am waiting to go with a friend of mine to tmobile and have her open her 5th and last family line on her account. I figure pay 35 dollars for activation, then 9.99 a month for the line and add on top of that the 25 dollars android web service and I got unlimited text and data + my share of 2500 minutes for what I pay now on my sprint sero account of 34.68. She’ll pay for the subsidized phone off that new line and then turn around and sell that on craigslist or upgrade one of her kids phones and call it a day.

You can get the Android data only plan from T-Mobile for I think $24.99 a month. So if you have a very good 3G coverage, then you are basically in perfect shape. Just use Google Voice for your voice and sms needs.

Hey its actually even cheaper. When you figure taxes. The monthly $20 will most likely have more tax percentage then the sales tax on the phone (which you might be able to avoid by purchasing online though you have the legal obligation to pay the tax that is a personal choice).

Wow! I was too lazy to break down the #s and was leaning toward the Nexus One because of the subsidy. Thanks for proving that the Nokia N900 is a FAR better value (cost less unlocked, does more, has keyboard)!!! Going to buy mine now!!